SOURCE: Electro Energy Inc.

May 15, 2007 17:52 ET

/ CORRECTION - Electro Energy Announces First Quarter Results

DANBURY, CT -- (MARKET WIRE) -- May 15, 2007 -- In the news release, "Electro Energy Announces First Quarter Results," issued earlier today by Electro Energy Inc. (NASDAQ: EEEI), we are advised by the company that the first sentence of the seventh paragraph should read "The Company will hold a conference call Wednesday, May 16th at 10 a.m. Eastern Time," rather than "The Company will hold a conference call today at 4:30 p.m. Eastern Time," as originally issued. Complete corrected text follows.

Electro Energy Announces First Quarter Results

DANBURY, CT -- May 15, 2007 -- Electro Energy Inc. (NASDAQ: EEEI), a leading provider of advanced battery technologies and associated systems, announced today first quarter results for the period ended March 31, 2007. Consolidated net revenue for the 2007 first quarter was $799,681 compared with $1,096,560 for the three months ended March 31, 2006. Service revenue was $721,703 in the first quarter of fiscal 2007 compared to $712,849 in the fiscal 2006 period. Product revenue of $77,978 declined 80% compared to 383,711 in fiscal 2006 as a result of a decline in sales to EaglePicher under a supply agreement, partially offset by an increase in sales of general aircraft products and Apache helicopter battery sales.

The service contract backlog as of March 31, 2007 was approximately $2.4 million.

Consolidated gross loss for the three months ended March 31, 2007 was $(225,103), compared with $(87,934) in the same period in fiscal 2006. The higher gross loss was mainly due to the decline in product revenue which resulted in a decline in product manufacturing volume despite a fixed level of overhead costs. Net loss for the three months ended March 31, 2007 was $(2,860,752) or $(0.13) per share compared with $(760,208) or $(0.05) per share in the first quarter of fiscal 2006.

Selling, general and administrative ("SG&A") expense for the three months ended March 31, 2007 was $1,635,337 compared with $530,062 in 2006. The increase in SG&A was primarily a result of $830,474 of start-up costs associated with the Florida manufacturing facility and an increase of approximately $290,000 in legal, consulting and professional fees, partially offset by a decrease of $64,720 in stock-based compensation expense. Research and development ("R&D") expense for the 2007 first quarter was $403,824 compared with $139,842 in 2006. R&D expense increased due to increase activities related to experimentation and product development for bipolar nickel metal hydride batteries for hybrid electric vehicle (HEV) and plug-in hybrid vehicle (PHEV) applications for automotive applications, for improved nickel cadmium batteries for the aerospace market, and for bipolar lithium ion for advanced military applications. Interest expense for the 2007 first quarter was $487,143 compared to $3,297 in the year-earlier period, primarily as a result of interest expense on the 8.5% senior secured convertible notes issued in April 2006.

The Company ended the 2007 first quarter with $5.0 million in cash and cash equivalents, including $2.1 million of restricted cash, compared to $6.3 million at year-end.

"During the first quarter we made significant progress in positioning our Florida facility to become a major supplier of advanced rechargeable batteries to domestic markets," said Michael E. Reed, CEO of Electro Energy. "We successfully started debug and qualification of our electrode and 18650 cylindrical cells production equipment. We are shipping sample products to targeted customers in the second quarter and expect significant customer commitments for shipment this year. We also have a strong backlog of service revenue. We believe that Electro Energy is well positioned to generate significant revenue growth."

Conference Call

The Company will hold a conference call Wednesday, May 16th at 10 a.m. Eastern Time. Interested participants should call (866) 541-8090 when calling within the United States or (706) 758-0055 when calling internationally. Please use pass code 4528739.

The playback of the conference will be available commencing two hours after the completion of the call and will be available for 30 days. To listen to the playback, please call (800) 642-1687 when calling within the United States or (706) 645-9291 when calling internationally. Please use pass code 4528739. The call will also be webcast and will be available on the Company's web site at www.electroenergyinc.com under the Investor Relations section under News and Events.

About Electro Energy Inc.

Electro Energy Inc., headquartered in Danbury, Connecticut, was founded in 1992 to develop, manufacture and commercialize high-powered, rechargeable bipolar nickel-metal hydride batteries for use in a wide range of applications. Its Colorado Springs operation supplies aerospace-grade high quality nickel cadmium batteries and components for satellites, aircraft and other specialty applications. EEEI is also developing high-power lithium rechargeable batteries utilizing the Company's proprietary bi-polar design. EEEI has recently acquired significant manufacturing assets near Gainesville, Fla. to accelerate commercialization of its battery technology. For further information, please visit http://www.electroenergyinc.com/.

Certain statements in this news release may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. All statements, other than statements of fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of the companies, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, the following: general economic and business conditions; competition; unexpected changes in technologies and technological advances; ability to commercialize and manufacture products; results of experimental studies; research and development activities; changes in, or failure to comply with, governmental regulations; and the ability to obtain adequate financing in the future. This information is qualified in its entirety by cautionary statements and risk factors disclosure contained in certain of Electro Energy Inc.'s Securities and Exchange Commission filings available at http://www.sec.gov.

                   ELECTRO ENERGY INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED BALANCE SHEET
                              March 31, 2007
                                (UNAUDITED)

ASSETS
CURRENT ASSETS
  Cash and cash equivalents                                   $  3,040,709
  Current portion of cash - restricted                           1,935,000
  Accounts receivable                                              413,081
  Inventories                                                      297,701
  Prepaid expenses and other current assets                        202,157
                                                              ------------
    Total Current Assets                                         5,888,648
                                                              ------------

PROPERTY AND EQUIPMENT, Net                                     22,709,569
                                                              ------------

OTHER ASSETS
  Restricted cash, less current portion                            180,442
  Deferred financing costs                                         917,598
  Security deposit                                                 228,164
                                                              ------------
    Total Other Assets                                           1,326,204
                                                              ------------

    TOTAL ASSETS                                              $ 29,924,421
                                                              ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Current portion of senior secured convertible notes, net of
   deferred debt discount of $365,095                         $    634,905
  Accounts payable and accrued expenses                            686,704
  Current portion of note payable                                   61,193
  Current portion of capital lease                                  10,411
                                                              ------------
    Total Current Liabilities                                    1,393,213
                                                              ------------

OTHER LIABILITIES
  Secured convertible note, net of current portion and
   deferred debt discount of $805,955                            9,194,045
  Deferred rent, less current portion                              405,944
  Capital lease, less current portion                               31,469
                                                              ------------
    Total Other Liabilities                                      9,631,458
                                                              ------------
    TOTAL LIABILITIES                                           11,024,671
                                                              ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Preferred stock, $0.001 par value, 10,000 shares
   authorized;
    Series A Convertible Preferred Stock, 5,600 shares
    designated; 5,501 shares issued, 160 outstanding
    ($160,000 liquidation preference)                                    -
  Common stock, $0.001 par value, 50,000,000 shares
    authorized; 23,348,896 shares issued and
    outstanding                                                     23,349
  Additional paid-in capital                                    39,204,196
  Deferred lease costs, net of amortization                       (869,966)
  Accumulated deficit                                          (19,457,829)
                                                              ------------

    TOTAL STOCKHOLDERS' EQUITY                                  18,899,750
                                                              ------------

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $ 29,924,421
                                                              ============




                   ELECTRO ENERGY INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            FOR THE THREE MONTHS ENDED MARCH 31, 2007 and 2006
                                (UNAUDITED)


                                                    2007          2006
                                                ------------  ------------

NET REVENUE
 Services                                       $    721,703  $    712,849
 Products                                             77,978       383,711
                                                ------------  ------------
    TOTAL NET REVENUE                                799,681     1,096,560
                                                ------------  ------------

COST OF REVENUE
 Cost of services                                    897,635       838,569
 Cost of products                                    127,149       345,925
                                                ------------  ------------
    TOTAL COST OF REVENUE                          1,024,784     1,184,494
                                                ------------  ------------

    GROSS LOSS                                      (225,103)      (87,934)
                                                ------------  ------------

OPERATING EXPENSES
 Selling, general and administrative (including
  non cash compensation of $218,861 and $257,731
  in 2007 and 2006, respectively)                  1,635,337       530,062
 Research and development                            403,824       139,842
                                                ------------  ------------
    TOTAL OPERATING EXPENSES                       2,039,161       669,904
                                                ------------  ------------

    OPERATING LOSS                                (2,264,264)     (757,838)
                                                ------------  ------------

OTHER EXPENSE (INCOME)
 Interest expense                                    487,143         3,297
 Interest and dividend income                        (54,240)       (1,518)
 Amortization of deferred debt discount               87,107             -
 Amortization of deferred financing costs             76,478             -
 Loss on disposal of fixed assets, net                     -           591
                                                ------------  ------------
    TOTAL OTHER EXPENSE                              596,488         2,370
                                                ------------  ------------

                                                ------------  ------------
NET LOSS                                        $ (2,860,752) $   (760,208)
                                                ============  ============

NET LOSS PER SHARE - BASIC AND DILUTED          $      (0.13) $      (0.05)
                                                ============  ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED                   22,838,383    16,641,025
                                                ============  ============

Contact Information

  • Contact:
    Michael Wachs
    CEOcast, Inc. for Electro Energy
    (212) 732-4300